Understanding Disability Insurance Cover

Rahul worked as a senior IT developer for a multinational company. Being the sole breadwinner, he bought a term insurance plan to secure his family financially during his absence.

Further, he also purchased a health insurance policy to meet health-related contingencies and had a home loan.

All was going smooth until one day, when driving back home from work, Rahul met with an accident and suffered serious injuries to his arms.

He could no longer work, his income flow stopped, but his medical bills and financial responsibilities didn’t. Although he had a term insurance plan, it could not support him in such a scenario.

Like Rahul, many of us may have faced this situation at one time or the other and wondered what went wrong.

What could have been done differently to prepare for such a situation without worrying about the loss of income and future expenses?

To prepare for such mishaps, one should go for a disability insurance cover. Let’s look at what this cover entails:

What is a disability insurance cover?

Disability insurance can replace a portion of your lost income if you are unable to work due to sickness or injury.

In case of an accident that leads to disability, you will receive payments to cover not just actual expenses but also loss of income.

It can help you meet your financial obligations and maintain your current lifestyle. It includes paid sick leave, short-term disability benefits, and long-term disability benefits.

What is covered?

The most basic versions cover temporary and permanent total disability due to accident. In case you are disabled, fully and permanently, you will receive the full sum insured.

If the disability is partial, the policy will pay a percentage of the sum insured, depending on the degree of disability.

For example, Max Bupa’s Disability Benefit Cover provides up to 125% of the sum insured in case of permanent total disability, and in case of permanent partial disability, you will be paid up to 100% of sum assured.

Further, if the disability is for a short term, you would be paid a weekly benefit to compensate for the loss of income up to the maximum period specified in the policy.

How to select a disability insurance cover?

There are a few points to consider before you sign up for a disability insurance cover:

Choose the right coverage amount: Income level and age are the main factors that play a vital role in determining the sum insured. Assess your needs and select the sum assured accordingly. Getting this step right will ensure that you and your family can continue to maintain your current lifestyle even if your income dries up.

Compare plans against disabilities covered: It is important to compare the degree and types of permanent disabilities that are covered across products and opt for the widest coverage. Even though comprehensive coverage is more expensive, it is more effective than limited disability coverage. For example, if a policyholder with total disability cover loses his index finger and his hospital gives him a certificate of 15% disability, his insurer might deny his claim as he is not totally disabled.

Read the fine-print: Policies differ in the degrees of disability that they cover and the percentage of sum insured they pay. In case of partial disability, the percentage you are paid depends on what is stated in the policy document. So, pay attention to the clauses.

Buying Tip

You can either choose a standalone disability insurance policy or opt for disability cover riders along with an insurance plan.

If the basic protection is what you are looking for, then you may opt for the disability/accidental death riders which you can buy as an add on to your Life Insurance cover.

However, if you would like a cover that provides comprehensive coverage, go for a standalone policy.